Victory in federal appeals court surprises many legal experts

April 15, 2012|By Ameet Sachdev, Chicago Tribune reporter

George McReynolds, who is the lead plaintiff in a class-action discrimination lawsuit against Merrill Lynch, which was heard in federal court in Chicago, stands next to an old Southern magnolia tree at his home in Nashville, Tenn. (Jeff Adkins, Photo for the Chicago Tribune)

When the U.S. Supreme Court last year threw out a sexual discrimination lawsuit against Wal-Mart involving potentially 1.5 million current and former female employees, some predicted the end of the large-scale class action.

Not so fast. Just ask George McReynolds.

Before the Wal-Mart ruling, the African-American stock broker was not successful in receiving class-action status for his suit asserting racial discrimination against Merrill Lynch. After the decision, McReynolds went back to court and won the right to sue on behalf of himself and other black brokers.

Thanks to creative lawyering, McReynolds used the Wal-Mart decision, widely viewed as pro-business, to buttress his request for a class action. His recent victory in the federal appeals court in Chicago surprised even judges.

"Our appeals court tends to be a circuit that strictly polices class certification," said U.S. District Judge Ruben Castillo. "That's why it was surprising that our circuit rendered that decision (in McReynolds)."

The McReynolds decision is counter to June's Wal-Mart ruling. The Supreme Court sided with Wal-Mart in finding that the women did not have enough in common to proceed as a class. In its majority opinion, the court raised the threshold of establishing a class, which is decided before examining the merits of a case. The case tightened the rules for how large groups of individuals can join together to sue a company for alleged harm done to them.

Judges have invoked Wal-Mart to deny class certification or reverse rulings that had allowed individuals to form a class. By the end of last year, the decision in Wal-Mart Stores Inc. v. Dukes had been cited 260 times, according to a study by Chicago-based Seyfarth Shaw, which specializes in defending companies in workplace litigation. Seyfarth said the number of citations was "remarkable" considering the short history of the Wal-Mart decision.

Still, McReynolds is an example of how class-action attorneys are figuring out theories to advance cases, said Gerald Maatman, a Seyfarth partner who co-chairs its class-action practice. "The reports of class actions being dead were highly exaggerated," Maatman said.

The McReynolds case was filed in 2005 in federal court in Chicago. McReynolds had worked for Merrill Lynch for more than 20 years in its Nashville office. He accused the financial firm of having a hostile culture that allowed discrimination in hiring, advancement and pay. Among other charges, he alleged that blacks were not treated fairly when the clients of departing brokers were reassigned to other financial advisers at the company.

Merrill, now part of Bank of America Corp., has denied the allegations.

"Diversity and inclusion are part of Bank of America's and Merrill Lynch's culture and core values," the company said in a statement. "We actively promote an environment where all associates have the opportunity to achieve personal success and can contribute to the growth in our business."

A year later, 16 black employees joined McReynolds' suit. Their amended complaint cited some grim statistics: Merrill had black brokers in only 25 of 50 states, and 70 percent of the firm's black brokers were in the bottom two-fifths of the company's rankings that determine distribution of benefits.

Their lawyer, Linda Friedman of the Chicago law firm Stowell & Friedman, sought class-action status on behalf of about 700 current and former brokers who are black.

Unlike other lawsuits, class actions require a judge to formally certify them before they can proceed. Not along ago, suits were almost always granted class status. Cases often were settled after becoming a class action because defendants didn't want the risk of paying large monetary damages to thousands of class members. But the process has become much more cumbersome and expensive, as burden of proof to warrant being a class has grown.

The McReynolds case was no different. Both sides spent years gathering evidence and spending big money on experts to bolster their positions.

Friedman relied on statistical evidence to establish that the plaintiffs had common issues and facts that bound them. But U.S. District Judge Robert Gettleman was not convinced and in 2010, five years after the suit was filed, he refused to approve the class action. Additionally, he said it was difficult to establish commonality when the class members were supervised by hundreds of different people, each exercising discretion granted them by top management.

Friedman traveled to the U.S. Supreme Court in March 2011 to watch the arguments in the Wal-Mart case.

"Even the more liberal judges were skeptical that you could have one case for 1.5 million people," Friedman said. "There seemed to be consensus that it was just too big."